The Steel Price Rise and You

What's causing the increase in steel prices?

Manufacturing steel

Due to Iron Ore being quite brittle in its natural state, thanks to the presence of a high number of iron oxides, it wasn’t until the advent of the coal furnace that the strength of Iron was truly realised.

Steel itself is produced by smelting Iron Ore in a blast furnace, and removing the oxides with the help of coking or metallurgical coal in order to produce steel. This method, while tinkered with, has remained much the same for 700 years.

Iron Ore

Iron Ore is the major component in steel production, and has had quite the volatile couple of years in terms of price changes and demand since the pandemic began.

In May of 2021, the Iron Ore price hit an all time high, reaching an incredible $237 USD per tonne.

Metallurgical Coal

Metallurgical coal, or coking coal, is crucial in the current blast furnace technique. It not only helps provide the carbon element of steel that makes it stronger, but also removes the iron oxides that cause imperfections.

While many, like Australian entrepreneur Andrew “Twiggy” Forrest are looking into the development of green steel initiatives, this technology is a fair way off being widespread.

Political and Economic Impacts

The Covid-19 Pandemic

Almost every industry on the planet has seen adverse effects of the pandemic in the last two years, and understandably the steel industry is no different.

Brazil, the worlds second largest iron ore producer, suffered mine closures due to accidents, and widespread Covid, and many workers who once travelled interstate or internationally were unable to do so.

Economic Stimuli

Many governments, including in Australia and China, sought to kickstart their lagging economies by providing incentives to citizens and businesses.

In Australia, these incentives, combined with many people returning home to once rented out properties, resulted in a construction and housing boom, with the most new house starts seen in over fifty years

Existing Infrastructure Projects

Many projects across Australia pertaining to rail and road projects were already underway before the Covid pandemic, and continue to demand steel for ongoing construction.

Such projects include The Inland Rail project, the Metro Tunnel in Melbourne, Sydney’s Sydney Metro project, and the Metronet transport network in the Perth metropolitan area.

What this means for Australians

The shortage of steel, along with continued high demand has not only pushed up the price of steel in Australia, but also led to longer lead times on many products, due to both increased demand on these products, but also rations placed on steel purchases by producers.

When it comes to water tanks, sheds and other such structures, lead times may have increased along with prices.

Southern Cross endeavours to still provide the best quality service and water tanks possible, despite the challenging circumstances.

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